Good morning, ladies and gentlemen. Thank you for standing by. Welcome to today's Titan Machinery Inc. First Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] Hosting today's conference will be John Mills with ICR. As a reminder, today's conference is being recorded. And now, I would like to turn the conference over to Mr. John Mills. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen. Welcome to Titan Machinery's First Quarter 2013 Earnings Conference Call. On the call today from the company are David Meyer, Chairman and Chief Executive Officer; Peter Christianson, President and Chief Operating Officer; and Mark Kalvoda, Chief Financial Officer. By now, everyone should have access to the earnings release for the first quarter ended April 30, 2012, which went out this morning at approximately 6:45 Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Titan's website at titanmachinery.com. This call is being webcast and a replay will be available on the company's website as well. In addition, we are providing a slide presentation to accompany today's prepared remarks. We suggest you access the presentation now by going to Titan's website and clicking on the Investor Relations tab. The presentation is directly below the webcast information in the middle of the page. Before we begin, we'd like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and, therefore, undue reliance should not be placed upon them. These statements are based on current expectations of management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of Titan's most recently filed 10-K. These risk factors contain a more detailed discussion of the factors that could cause actual results to differ materially from those projected in any forward-looking statements. Titan assumes no obligation to update any forward-looking statements that may be made in today's release or call. [Operator Instructions] The call will last approximately 45 minutes. David Meyer will provide highlights of the company's first quarter results, a general update on our business and review our recent acquisitions. Then Mark Kalvoda will review the financial results in more detail. And Peter Christianson will discuss our segment operating results and our fiscal 2013 annual revenue, net income and earnings per share guidance range, along with our outlook modeling assumptions. Then we will open the call to take your questions. Now, I'd like to open the call to the company's Chairman and CEO, Mr. David Meyer. Go ahead, David.

Thank you, John. Good morning, everyone. Welcome to our first quarter of fiscal 2013 earnings conference call. As John mentioned, to help you follow today's prepared remarks, we have provided a slide presentation, which you can access on the Investor Relations portion of our website at www.titanmachinery.com. If you click on the Investor Relations tab on the right side of the page, you will see the presentation directly below the webcast in the middle of the page. On Slide 2, you'll see our first quarter 2013 results, which were in line with our expectations. Revenue for the first quarter was $421.7 million. Our pretax income was $12.4 million and we earned $0.36 per diluted share. Our business continues to benefit from organic and acquired growth across both our Agricultural and Construction segments driven by a healthy agriculture economy and steady improvements in the construction market in our footprint. During the quarter, we made several key acquisitions across all growth platforms, including Agricultural Retail, Construction Retail, International and Rental. The first quarter operating income reflects the seasonality of our increased rental business, an attractive growth platform, which we have expanded our rental fleet by approximately 200% from a year ago. While we have modeled an increase in our annual operating income from this business unit, the first quarter seasonality had a negative impact on our results, which was in line with our expectations and positions us well for a strong year in our rental business. Based on our first quarter results and outlook for the remainder of the year, we are reiterating our annual revenue, net income and earnings per share guidance for fiscal 2013. Peter will provide some additional comments on our guidance in his remarks, but looking at Slide 3, you will see that we have continued to expect…

Thanks, David. Turning to Slide 7. Our total revenue for the fiscal 2013 first quarter grew 32.5% at $421.7 million, with approximately 49% from organic growth and 51% from acquisition growth. All of our revenue sources contributed to this quarter-over-quarter increase. Our revenue growth reflects higher sales in both our Agriculture and Construction segments and resulted from the continuation of a strong agriculture equipment market and an improving construction equipment market in a region in which we do business. Our revenue also benefited from growth in the Rental business in our Construction segment, which reflects our initiative to expand this growth platform through strategic acquisitions and the investment in our designated rental fleet at our existing locations. I will provide more details on our Rental business in a moment. On Slide 8, our gross profit for the quarter increased 33.3% to $70.4 million, reflecting -- primarily reflecting higher revenue. Our gross profit margin was 16.7% compared to 16.6% for the same quarter last year. Gross margins were positively impacted by higher sales and favorable mix shift to our higher-margin parts, service and rental business, generating 57% of our gross profit for the quarter. This was partially offset by lower equipment margins compared to the same period last year. As many of you know, our equipment margins fluctuate from quarter-to-quarter. We strive to maximize our margins in any given quarter while maintaining market share to ensure our long-term high-margin aftersales product support business. Our Rental gross margins were higher last year due to the flooding in the first quarter of last year. We believe our larger rental fleet will generate increased gross profit and have a positive effect on Construction gross margins in the coming quarters due to the seasonal nature of the Rental business. Our operating expenses as a percentage…

Thanks, Mark. Now turning to Slide 11. You'll see an overview of our segment results for the first quarter. Agricultural sales were $360.1 million, driven by acquisitions and organic growth due to the favorable Ag economy for our customers in the first quarter. We generated an Ag pretax income increase of 10.6% to $14.3 million. This increase was primarily due to higher sales and was partially offset by compression in equipment margins, which Mark previously discussed. Turning to our Construction segment. Our increased revenue reflects strong top line growth, which was driven by acquired growth, organic growth and the expansion of our Rental business. We're ramping up this segment of our business in line with the recovery cycle of the industry and our strategy to expand our Rental business. The first quarter pretax loss reflects the costs associated with ramping up both the Rental business and Retail business. We believe we are positioned to generate increased gross profit and positive construction operating results in the upcoming quarters. Turning to Slide 12. This shows our same-store results for the first quarter of fiscal 2013. Our overall same-store sales increased 16.2%, highlighting solid year-over-year improvements in both segments. The improved agricultural same-store sales of 13.4% for the first quarter of fiscal 2013 are reflective of the continuation of the strong agricultural economy. The first quarter fiscal 2013 construction same-store sales increased 34.9%. This improvement underscores the improved construction equipment market and higher rental revenues. For the first quarter of fiscal 2013 overall same-store gross profit increased 16.9% year-over-year, primarily reflecting higher sales. For modeling purposes, it's important to remember that we calculate same-store sales by including stores that were with Titan for the entire period in which we are comparing. In other words, only stores that were part of Titan for the…

[Operator Instructions] And we'll take our first question from Steve Dyer with Craig-Hallum.

Operating expenses, you noted a bit high, I think, and attributed a lot of that to kind of Construction. How should we think about that maybe as a percentage of revenue or however you want to, I guess, give color on that going forward through the rest of the year?

Yes, Steve, this is Mark. Yes, we kind of talked about it just with CE being a higher percent of our business now and kind of the ramping up of that Rental fleet, which started in the second quarter of last year. It creates a higher operating expense as a percent of sales. So throughout the remainder of the year, it should be a little bit more in line because we ramped that up in the second quarter. We began ramping that up in the second quarter last year. But you'll still see it -- year-over-year, you'll probably see it just a little bit higher than what we ended up last year.

Okay. And then floor plan, that was nicely lower relative to the inventory level. Would you expect, and I'm assuming, as you know, that a lot of that was given the paydown of it. Is that number going to be a little bit lower now going forward given the paydown?

Yes. With the equity -- the equity in our inventory this time, like I said, was impacted by that senior convertible debt that we had. So inventory levels may be going up just a little bit, that equity and inventory should remain about the same. That equity and inventory at the end here was about at 22% versus 17% at the end of the year. So right around that 20% is probably reasonable to expect going forward.

Okay. And then last question and I'll hop back in the queue. What accounts for the swing in equipment gross margin? It's certainly kind of at the low end of the range. But as you noted, you did that a couple of times last year. Is it a different kind of equipment? I know later in the year, sometimes it's the -- you hit some sales targets and things like that. But how do we think about that or how do we model that, I guess, going forward?

Well, Steve, this is Peter. And essentially, it's -- the way we have our field marketers compensated and the way that we operate our business, we will aggressively take what the market will give us on margins, but at the same time, we're going to really focus on protecting that market share position. We had market share gains last year and we want to protect that share position so that we get this aftersales product support down the stream. And so from quarter-to-quarter, it can fluctuate. But if you look historically, we've been able to kind of maintain a pretty steady level.

[Operator Instructions] Next, we'll hear from Rick Nelson with Stephens Investment.

You mentioned that CNH capacity is booked into calendar fourth quarter. I was wondering what sort of visibility you have into your own order book and what -- where you'll see the strengths in tractors or combines.

Well, we're seeing strength in all the segments. Right now, I'd say, full -- high-horsepower 4-wheel drives and high-horsepower quadtracs are probably the tightest pipeline out there. We've done a good job of doing some presell going into this -- the order slots and then also securing some order slots and also having some of the inventory on hand that -- to meet our revenue targets, Rick.

How do you think that weather affected your business in the quarter?

Well, if you go back a year ago, I don't know if you remember this or not, but the whole -- this whole upper Midwest area, especially the Missouri River system, it was totally inundated with flooding. I would say every piece of construction equipment we could get our hands on was all -- building dikes or hauling sandbags or doing some reconstruction or moving dirt, I mean, it was just -- there was -- the semi trucks were rolling, it was just a big boom and we didn't see that this year. So this is getting more in the normal historical level. But last year, there was a big shot in the arm from everything we saw on the construction side from that pretty significant flooding, I mean, probably historical levels in some of our markets.

So do you think that had a pull-forward effect, if you will, a year ago that compares here in Q2, that get a lot easier?

No. This is Peter. And like I spoke about on that last slide, Rick, we're just looking at this as being much more in line with historical trends on the Construction business. Historically, the first quarter and fourth quarter are your softer quarters in the construction industry, and this is right in line with that. The other impact, last year versus this year on our Construction was that we were -- during the flood period, there was more on our Parts and Service side as well.

Okay. So would you expect then in Q2 that, that Parts and Service business comes in? The tractors, I'm sure, were in the field operating and not in the repair shops.

It'll be much more in line with our historical trends.

Next, we'll hear from Robert McCarthy with Robert W. Baird.

First, I just want to clarify and make sure I understand the point you were making, Peter, about seasonality. Is it your expectation that the share -- the first-half versus second-half split for pretax income this year will be consistent with historical patterns? Is that what you were telling us?

Rob, that's the way we've been modeling our business.

Okay. I wonder if you could update us on what you're seeing in the early days in your new presence in Romania? I mean, at least directionally, are these businesses growing? Are they growing rapidly? Or are you having any impact on the business yet? Can you just give us an update on what's happening on the ground there?

It's pretty early to comment on our impact on the business. Right now we're still in the early stages of integrating our operating model into those operations. But what I can tell you is that in the Romanian market, which is the larger market of the 2 countries that we have expanded into, in the Romanian market our plan was to build out the dealer distribution network. As you can recall, when we did the acquisition they had 2 distribution locations. And now we just opened a new one in this last quarter. And we will continue to build that distribution out so that we've got the proper market representation, and we think that's going to really drive growth going forward, Rob. And the Bulgarian market, they had a pretty built-out distribution network, and things are going along as anticipated.

And to my question about what's going on with their -- I mean, are they up from where they were last year?

Right now the results are so preliminary as far as the timing on it. What I would say is that the one thing that we do know about those markets, again, these are developing markets and more similar to what we used to have maybe 20 years ago in that it's much stronger weighted front half, back half. The back half is -- what we've seen historically in those markets is that their back half, their back 2 quarters are even -- there's a stronger differentiation in those markets than there is in North America.

Okay. And then I wonder if we could just spend another moment on the Construction segment and profitability in the first quarter. You had strong Rental revenue growth, you had strong sales growth, and yet earnings were down substantially year-on-year. And I'm not -- I'm still not quite sure I understand why. Are we talking about a combination of having invested in some infrastructure plus the absence of a real favorable pricing environment that existed last year? Is it pricing that's the big difference?

No, no. Rob, this is Mark. It really kind of goes to the rental activity that occurred. We've got a larger rental fleet this year, lower margins this year compared to last year with some of that seasonality going on. We also had just investment in, call it, overhead in our business where we're -- we've got different personnel that are dedicated to that Rental business, which is kind of a fixed expense each quarter then. There's also rental interest expense on the rental fleet. There's all these types of kind of fixed expenses that flow into the quarter that when you have a softer revenue quarter relative to the size of the rental fleet, it creates unfavorable conditions as far as your profitability goes. So there's that piece. There's also, which -- we built that rental fleet even more, I talked about that increase in the quarter. We're positioning that for growth going forward, that's why we're ramping up that business. Also just to kind of mention another factor that's in there as well is just we've brought in a lot of acquisition stores, a lot of CE or Construction acquisition stores last year, and with the -- they haven't been fully ramped up yet as well. Second quarter last year, we had some pretty significant acquisition stores that came in. So when you're looking year-over-year, that also affects the comp -- comparisons.

Next we'll hear from Tom Varesh with M Partners.

Can you shed some light on what portion of your floor plans were interest-bearing this quarter versus last year, if I'm just looking at the percentage?

This quarter it was 53% was interest-bearing. And if you look at a year ago, it was 55% was interest-bearing.

Okay. All right. So is the floor plan expense then in the quarter indicative sort of the run rate on a quarterly basis? Because from my model, that was where I was different, and that was the difference in my estimates versus what you guys reported. So I'm just trying to get a grasp on how I should be thinking about that line.

Yes, sure, Tom. So going forward what you're going to see as it come down a little bit because of our convertible debt. Some of the proceeds were used to pay down some of that interest-bearing floor plan. But that's going to be replaced with interest -- other interest expense on that piece.

Right, okay. All right. And the AEM reported some very weak combine sales numbers. Is that timing or is that something you're seeing in your regions? Can you shed some light on that?

Well, I think what happened is one of our major competitors who does typically report a large part of the industry, their shipments were somewhat delayed in that quarter. So I think you're going to probably see those come in later in the year, as what we're anticipating. But they did not deliver typically what they had done in that same period previously.

Okay, so it's not necessarily weakness you're seeing in your business in...

Not on our business at all. That's just that it's coming from one of the other colors out there.

[Operator Instructions] Next we'll hear from our Arthur Weise with Lord Abbett.

You have been expanding your construction equipment fleet. How do you plan for that? What are the factors that go into determining how much you're buying at any one point?

It's based on we have dedicated rental region managers, and these rental region managers put together a forecast with the individual yards that we operate throughout our branches. And we roll that together and then put in the fleet to support that.

And would you say that last year's activity in this quarter influenced that decision or did they realize that it was more onetime in nature, given the flooding?

No, I would say that we knew that, that was onetime in nature. That's just something that was a natural event. And we did not base our forecasting, thinking that it was going to flood every year. And so this fleet that we grew was to support this long-term strategy that we have of building the Rental business unit as a growth platform for the company.

So your expectation is you will get the dividends of the higher rental fleet as the year progresses?

Yes, it is...

At this time, there are no further questions. I'll turn things back over for any additional or closing remarks.

All right. Thank you for your interest in Titan Machinery, and we're looking forward to updating you on our progress on our next call in September. We'll also be attending a number of investor events and look forward to seeing you during the next few months. Have a good day.

And that does conclude today's teleconference. Thank you all for joining.